Surveys suggest that for an average small business, financial paperwork and records can take up as much as 20% of available work time. For most businesses that time could be far more productively spent on customer facing matters, product or service development or marketing.
The question is, can your business afford a bookkeeper? Additionally, is it better to have a bookkeeper and an accountant, is it necessary and are the roles separate and different?
Small business bookkeeping obligations
Failure to keep records can result in a fine of up to £3000 and disqualification as a Company Director so it is important to understand your obligations.
According to the Companies Act all companies must keep “true and fair” financial and accounting records for at least 6 years and in some cases longer such as if a transaction covers more than one year’s accounting period or if you have bought something that is expected to last longer than 6 years like equipment or machinery.
Receipts and invoices detailing all money sent and received by the company must be kept as well as details of all assets owned and any debts the company owes or is owed.
Details of stock owned at the end of the financial year and the stocktakings used to work this out must always be available and details of all goods bought and sold throughout the year and, unless you are running a retail business, you will also have to keep a log of who you bought and sold to and from.
Bookkeeper or accountant or both?
We find that there is a lot of confusion and misunderstanding about the terms bookkeeping and accountants or the perceived role and cost of each. Commonly this includes :-
- A belief that by having an internal bookkeeper there is no need to have an accountant
- That accountants don’t do bookkeeping
- That accountants will be much more expensive for bookkeeping than a bookkeeper.
- That bookkeeping is different from preparing accounts
The reality is that technology has removed a lot of traditional differences in terms of using a bookkeeper and accountant and radically reduced bookkeeping costs. Many accountants are happy to do the basic recording of day to day transactions.
Accountants such as ourselves offer fixed fee packages using the excellent software now available which in many cases can save money from separating out the tasks of bookkeeping from accounting and using different suppliers.
Confusion about what bookkeepers do
There is nothing inherently complex in understanding bookkeeping. It is essentially the efficient and comprehensive keeping of records and recording day to day financial information. In terms of tasks, bookkeepers will typically :-
- Be responsible for billing of goods or services.
- Recording monies received.
- Recording invoices received from suppliers and paying suppliers.
- Employee payroll.
- VAT records and possibly VAT submissions.
- Record information utilising double entry accounting principles,
Accounts & Legal bookkeeping services
In many cases, it makes sound commercial sense to use accountants for bookkeeping as well as oversight and preparation of the formal accounts and reports. We understand the demands on small businesses and consequently have a solution to suit all budgets and types of business.
The benefits include efficiency as work is not duplicated or doesn’t need to be double checked and our bookkeeping or support ultimately feeds into the statutory accounts process with the assurance that everything is monitored and checked by our fully qualified Accountants in our London office.
For those clients who prefer to do their bookkeeping in-house, we dovetail with your bookkeeper to add additional bookkeeping and accounting services to help enhance financial reporting and planning. Another option is for clients or bookkeepers to input data directly into our online accounts software portal, ensuring that our accounts team can offer live support and advice as soon as data is entered.
Bookkeeping is an essential prerequisite for preparing management accounts, a vital tool for businesses which we strongly recommend should be prepared on a monthly or quarterly basis. Monitoring your business progress and performance against your budget as well as improving your ability to chase trade debtors and keep track of suppliers’ invoices all start with good and complete bookkeeping.